He also wanted to abolish JobCentres, suspend consumer rights laws for nine months and ignore some EU ­employment regulations.

Speculation had been rife for months that Mr Hilton was on the verge of quitting as he became ­frustrated at the PM’s ­reliance on George Osborne and Cabinet Secretary Sir Jeremy Heywood.

He was also frustrated with the slow pace of change.

On his bike: Aide Steve Hilton exits (Image: Political Pictures)

Mr Hilton will take an “unpaid academic ­sabbatical at Stanford University” but return next summer, Downing Street said.

A spokesman said: “With his wife and young family, Steve will be moving to ­California. He will join Stanford as a visiting scholar, and will also be a visiting fellow at Stanford’s Hoover Institution.”

Mr Hilton is married to Rachel Whetstone – the high-powered communications chief for Google. They have two children and are godparents to David Cameron’s late eldest son Ivan.

One Downing Street insider said Whitehall staff were delighted to see the back of Mr Hilton and his volcanic temper.

“Civil ­servants are ­beginning to emerge blinking from their hiding places under tables and inside cupboards,” the source said.

Meanwhile, Mr Cameron faced another blow as French President Nicolas Sarkozy openly ridiculed him at an EU summit yesterday – after the Prime Minister had another stand-up row with European leaders.

Mr Sarkozy mocked the PM’s “lovely letter”, in which he had set out a series of key demands aimed at kick-starting the European economy.